Be sure when negotiating your purchase contract that you ask for closing costs concessions. Most lenders, including fha hud insured loans, will allow up to 6% in seller concessions. With conventional loans, lenders can place limits on a home buyer’s ability to ask for seller-paid.
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Few seller concessions are permitted in transactions involving single-family mortgages insured by the Federal Housing Administration (FHA). Sellers are allowed to pay up to six discount points (one point equals 1 percent of the loan amount); but other concessions may cause the buyer’s down payment to be increased.
If you are a buyer with a limited amount of down payment and you need seller concessions, you ough to be leaning towards having an FHA mortgage rather than a conventional loan. Everyone wants to have a conventional loan based on what the stigma in the air is.
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State law may also have a say in seller concessions, so be sure to ask if there are any other applicable rules aside from the FHA guidelines you’ll see below. Seller contributions are, as previously mentioned, limited to six percent–any contributions above this limit requires a dollar-for-dollar reduction in the loan amount. That goes for contributions made by the seller or ANY third party. According to FHA loan rules, "Sales concessions influence the price paid for real estate.
Any seller contributions that exceed that six percent limit requires a dollar-for-dollar reduction in the loan amount. According to FHA loan rules, “Sales concessions influence the price paid for real estate. For this reason, FHA requires that appraisers identify and report sales concessions.